Friday, October 9, 2015

Karl du Fresne: The strangely liberating experience of receiving money you haven't earned

I recently passed a personal milestone. I became a superannuitant. This entitles me to a Super Gold card and all the public transport perks that go with it.
A friend of mine, obviously with far too much time on his hands, worked out that I could travel from my home in the Wairarapa to Waiheke Island for $49. This would involve catching an off-peak train to Wellington, getting on a bus to Wellington Airport – all for nothing – then catching a cheap Jetstar flight to Auckland.
From Auckland Airport I could catch a bus free of charge to the downtown terminal, from where it would be a short walk to catch a ferry – again, at no cost – to Waiheke. The only cost to me would be the $49 Jetstar ticket.

All very interesting (and thank you Winston Peters), but what my friend failed to explain is why I should want to go to Waiheke in the first place.

I’ve been there and while it’s very pretty, I got the distinct impression that the principal objective of Waiheke islanders is to relieve mainlanders of as much of their money as possible in the shortest time available, and often without so much as a smile. (Old Chinese proverb:  If you find it difficult to smile, do not open a shop.) 

Putting all that aside, turning 65 does seem a life-changing event. A sum of money mysteriously turns up in my bank account every fortnight without my having done anything to earn it.

This a novel and strangely liberating experience. It means that for the first time in my life, if I were prepared to live frugally, I could possibly get by without working.

I don't intend to dwell here on the affordability issue, but my view, for what it’s worth, has long been that the age of entitlement for national super should be progressively raised, given that people are living and working longer. Of course I would say that, having reached 65 myself. 

I certainly intend to go on working while I can. But I also think there’s merit in the idea that people whose bodies are worn out after a lifetime of hard physical work should be allowed to retire earlier than 65 in return for a lower super payment.

As to whether superannuation should be means-tested, as it is in Australia, I’m not so sure.

The problem with that idea is that it penalises people who have made provision for their retirement by saving. This usually means denying themselves things they might otherwise have enjoyed.

Conversely, means testing could have the perverse effect of incentivising people not to save or acquire assets, knowing that the state will look after them. So, on balance: no, it would send the wrong signals. Slackers could be rewarded and the diligent penalised. What sort of message is that?

But never mind the big policy questions. Having reached 65 myself, I face a far more immediate personal dilemma – one that confronts almost every person of my age.

Do we carefully try to conserve whatever we’ve managed to save, keeping a tight rein on spending in the knowledge that we might need it to supplement national superannuation well into the future, or do we make the best of whatever time we’ve got?

Put more bluntly, should we scrimp or live it up?

The complicating factor is that none of us know how much time we have left. Over the past few years I have seen too many friends and relations – people of roughly my own age – get sick and die.

Only recently a friend and former colleague went into hospital for what should have been routine surgery. Unforeseen complications developed, as a result of which she died weeks later.

She and her recently retired husband were still active and looking toward to a full and rewarding life together. Almost overnight, everything changed.

Such stories are all too common. Inevitably, they encourage a fatalistic belief that we should live for today because we don’t know how many tomorrows we’ve got.

Certainly, friends of mine who have survived life-threatening illnesses are in no doubt that we should make the most of life while we can.

It doesn’t help when we read “expert” assessments of how much we need to live comfortably in retirement. The sums I often see quoted are wildly unrealistic for most people. They can be hardly be blamed if they give a helpless shrug and ask themselves why they should bother even trying. 

At the other end of the scale I see anxious letters to financial advice columns from people who have accumulated very substantial savings and are plainly terrified that they might end their lives in penury.

This tends to confirm my long-held view that the more money you’ve got, the more you’re likely to fret that it isn’t enough.

Fortunately we’re not presented with a stark choice between living a monastic existence of self-denial or going on a mad spending spree for fear that we might fall under a bus tomorrow. As with so many things in life, it’s a matter of balance and moderation.

There’s a sensible middle course and that’s the one I intend to take, if I’m allowed to by whatever mysterious forces control my life. It may mean forgoing a visit to Waiheke Island, but I can live with that.

Karl du Fresne blogs at
First published in the Nelson Mail and Manawatu Standard.


Stan said...

This is the first time I have read any of your articles. This article is so well written. I had a smile reading many of your lines, especially the last line. Cheers!

Brian said...

Money it’s my right!!
Karl’s article brings again to light the failure of Western Nations to realise that to rely upon Government to provide, protect and to take out of the hands of the individual the responsibility for his or her life and actions is a fatal blunder.
Reliance upon big government to provide has become a drug dependency in its growth in Western Society, its tentacles reach into our very home. As the example of the German law that the male of the species has to be seated to urinate. One can only congratulate Frau Merkle on her last achieving at the suppression of the male Teutonic urge to a degree that would have been welcomed by Europe in 1939!
Many other examples of governmental interference exist in our Western Culture and proliferate, as they are the life blood of bureaucratic existence.
Regretfully however it is what the majority of our population want, and the politicians whether left, right or the various shades in-between subscribe to this demand despite our ever diminishing resources. To stand up and state the reverse is political suicide, so then we are merely architects of our future demise.
The Welfare State has become a mushroomed cancerous growth, invented rightly to help the needy, it has spread mainly through the desire of us, the people; to be in fact cocooned against the reality of the world about us. The history message of the fall of Rome and of other great Empires, has been ignored, and our descendants will pay a huge price for our avarice and greed.
It has also placed us financially “in Hoc”, by squandering the wealth of our nation unnecessarily when we deny our own individual responsibly. In Parliament we have the lefts and the rights, but in reality we have only the political left. For dismantling the present welfare dependency is the province only of the right in political terms, and this is mirrored elsewhere in Western Countries.
Karl’s comment on the “The more money one has the more likely that one will fret over it whether it will be enough” has its birth place in inflation, with the advent of Keynesian economic theory that we can live with a little inflation. This is somewhat echoed in that we can live with a little crime as well!! Both are in fact, thieves.
Congratulations Karl, you have reached the milestone of 65, be grateful you are not 86. For that is when kindly well meaning people try to put you in a room to count the flies on the wall, Be thankful that the Government kindly take what money you have left (if any) after the Rest Home to add to your maintenance.
While those who have spent and spent on bonanzas unlimited, it used to be wine, women, and song! but I understand this is not acceptable in this day and age; leaving us the privilege of paying extra taxes to accommodate them in their old age.
Sometimes this humanitarian stuff gets a bit fluffy round the edges!!!
Ave Caesar Morituri te salutant !


Unknown said...

Oh forgot to give Karl congratulations for making 65 and for writing another great piece.

mike said...

It IS money you have earned Karl. Folks of my age (70+) remember paying very high income tax to "pay for an index linked pension when we retired". Yeh right, where did that go? No, you and me, we have earned it. So like me keep on working until you want to stop and enjoy your "savings". The pension money you are now getting.

Unknown said...

Actually we do have a form of super for people whose bodies are worn out. The sickness benefit and also unemployment benefit.
I agree that with advances in health care and knowledge there is a good argument for raising the age level for super. Of course that comes from a person who enjoys what he is doing and intends to keep doing it. I'm not sure that applies to most people who work in ordinary mundane jobs that don't provide much if any pleasure.


Mike1937 said...

Well written, Karl. Perhaps the most important task now facing you is to look after your mental health. Participating in some activity which keeps your brain active is most important, and I (at the age of almost 80) have found great interest and companionship in 2 marvellous organisations - U3A and Probus. The purpose of U3A is generally expressed as "continuing education" whereas Probus is more a matter of enjoying life and leisure. May I recommend both to senior citizens wishing to remain active and connected!

Unknown said...

Well done Karl. Welcome to Grey Power. The figures that are bandied about regarding the amount one needs to save in order to be 'comfortable' in retirement are, I think, generated by the investment organizations, which of course have a very serious interest in the amount you save with them. You'll how much is enough. More important than anything will be finding enough hours in the day to do what you wanna do.

Arthur said...

Congratulations on reaching the ripe old age of 65 You have probably earnt your super by payng taxes in NZ unlike those people who come in on the family reunification program, cant speak English contribute nothing get free health care, and after 10 years get the super and the gold card. And our mug MPs say it is fair, To whom not to us but as far as I can see it is a vote buying programme for them

Jens Meder said...

Our popular universal NZ Super from age 65 can be kept sustainable in a more fair and wealth creative (and preserving) way by resuming contributions to the NZ Super Fund (NZSF), and amending it into a permanent institution of Personal Accounts - PAs.
This way NZ Super would be partially pre-funded for the increasing proportion of our longer living descendants the same way it works for our baby boomers already.
PAs would make it more fair and acceptable by belonging to their owners' estates in the case of death before being all spent on financing their owners NZ Super (still equal to all, regardless how big a PA).
Thus, spendthrifts are still free to carry on with "wine, women and song", but will not become totally community dependent paupers (have nothings) when reaching age 65.
PAs would also totally eliminate justification of means testing NZ Super, because it is clearly visible how the PAs of higher income earners finance most and even all of their own NZ Super eventually.
Each year of raising the NZ Super entitlement age saves only about $1.2 billion a year (i.e. $2.4 billion a year if raising the entitlement age by 2 years), and already the annual earnings alone of our still young and small NZSF cover more than that, so with resuming contributions to the NZSF at its original rate of $2billion a year will also eliminate the need for raising the NZ Super entitlement age.
Beside all that the NZSF will also function as a wealth and jobs creative national development fund, converting our concern for NZ Super sustainability from a potential economic burden into an economic growth engine.

Peter said...

Mike Mather's comment was apt. You have earned that money!!! One of the few US systems I like is the idea of having a seperate Social Security account for each individual. If you work hard and pay taxes, social security taxation is deposited into your account. When you reach a prescribed age, you have the right to draw on that.
Credits to your account are capped at income to $165,000 per year. If you earn more than that you need to invest in private retirement accounts. If you need to draw on your account for social security, before retirement age, you lose credits.
A baseline is needed for those have long term health issues and can't acrue credits up to retirement age.
Immigrants cannot enter the country and claim benefits since they have no social security credits. Pacific Islanders cannot send their elderly here to collect superannuation which they would not receive back home. This system discourages immigrants who are not interested in working.
We have a very good health care system so such a social security system would work well. Giving social security to those who have earned it.

Unknown said...

When I was seventeen and began working, part of our taxes included 'Social Security', which, if my memory serves me right, was intended to help provide for those social services, such as Health Care and superannuation.
As a person who has always worked, up until retirement four months ago, and has never been on a benefit, I have no problem receiving superannuation, but I do wonder where we're going when there are people out there capable of working, who don't, receive benefits all their their lives, then continue to receive unearned income and benefits through superannuation, paid for all of us who have worked.
Yes, the US system does have some benefits - get off your backside, or don't have any income in retirement.